Litigation: How to conduct internal investigations

At some point, almost every organization encounters questions of actual or suspected wrongdoing by its employees, officers or directors. When that scenario arises, it is time to launch an internal investigation to ferret out any wrongdoing and to take swift action to correct it.

For most employees, cooperation in an internal investigation is a required condition of their continued employment. However, if the suspected wrongdoing turns out to have been conducted by one or more employees, the investigation may lead to anything from disciplinary proceedings against employees to criminal charges.

Given the severity of consequences that could stem from an internal investigation, it is absolutely critical that the investigating counsel provide company personnel with an adequate and clear Upjohn warning at the beginning of each interview to ensure the following:

There are no questions about who investigating counsel represents (only the company)

The purpose of the interview (to enable counsel to provide legal advice to the company)

What may be done with the information gleaned (though privileged, the company could decide to waive its privilege and share the information with the government—including law enforcement authorities)

That is the easy part.

The tough part happens when the employee asks investigating counsel an almost inevitable question: “Do I need a lawyer?”

The investigating attorney should avoid saying (or implying) that the employee does not need separate counsel. A proper Upjohn warning will have made it clear to the employee that investigating counsel does not represent the individual and represents only the organization.

However, in response to the question about separate counsel, investigating counsel should reiterate to the employee that, as counsel for the organization, he or she cannot advise the employee as to whether the employee needs a lawyer; only the employee can make that decision.

In certain situations, including many government inquiries that spawn internal investigations, there are specific employees or groups of employees that are likely to be at the center of the investigation—regardless of whether they did anything wrong and irrespective of whether the employee’s interests are likely to remain aligned with those of the company.

These individuals could possess key documents, may have witnessed the conduct at issue or could be similarly situated to individuals at other organizations or other parts of your organization who are being investigated for suspected wrongdoing. In those situations, it is proper for the company to draw the relevant factual distinctions to the attention of the employee and remind the employee that he or she can obtain separate counsel.

If the investigating counsel believes an employee’s interests are—or are likely to become—adverse to the interests of the company, the company—or investigating counsel on behalf of the company—should reiterate the Upjohn warning and encourage the employee to consider retaining separate counsel. The same course of conduct is appropriate if the company believes any of those employees are likely to be interviewed by government authorities.

Employees may be hesitant to seek individual counsel out of fear that they will be judged by the company as having done something wrong simply because he or she consults with separate counsel before being interviewed. The company and investigating counsel should take care to ensure that employees who are considering retaining separate counsel understand that the retention of separate counsel is not a reflection of the company’s belief as to wrongdoing. If an employee asks for an opportunity to consult with an attorney, the investigating counsel should endeavor to give the employee a reasonable amount of time to get his or her own lawyer.

Under many situations, if an employee gets separate counsel, the company will indemnify the employee for his or her attorney fees. But, the indemnification issue can also be tricky: Is the employee an officer or director? Will the company advance fees? What law governs? That is a topic for another day.